By Tim Cocks

NAKURU, Kenya, Jan 26 (Reuters) - Kenyans in the Rift Valley town of Nakuru feared more violence on Saturday after a disputed election triggered pitched battles between ethnic gangs that killed at least a dozen people.

Authorities have imposed a dusk-to-dawn curfew on the town, which had previously been spared the bloodshed of a political crisis that has claimed around 700 lives in the last month.

The Nakuru clashes pitted members of President Mwai Kibaki's Kikuyu tribe against Luos and Kalenjins who backed his rival Raila Odinga -- and largely caught the security forces unawares.

"The Kibaki supporters were blowing whistles to rally their people. I saw them kill someone," said Benson Waliaula, 36, a security guard at a bank in the centre of town.

"They tore his clothes off first then killed him with blows of a panga (machete). It took him some time to die. The police were just watching. There was nothing they could do."

Residents said many homes were burned and shops looted as large groups of youths armed with rocks, bows and arrows and homemade guns confronted each other across town.

Kenyan army troops were deployed in some neighbourhoods, where they cleared burning barricades off roads -- the first time the military has been used during the crisis.

But witnesses said the police mostly stayed in their barracks, apparently unsure how to contain the chaos.

National police spokesman Eric Kiraithe said in a statement late on Friday that clashes between tribal gangs had broken out in four Nakuru suburbs, but that calm had been restored.

He rejected witness accounts that a dozen people had died, saying officers were investigating four possible killings. And he said "comprehensive measures" were taken to ensure security.

"Rumours that lorry loads of criminal gangs have been transported into Nakuru from various parts of Rift Valley with a mission to commit crimes against certain communities are malicious and intended to cause unnecessary tension," he said.

"KILLING OUR PEOPLE"

Overnight, the streets of the town were deserted.

Morris Ouma, a 25-year-old trader, told Reuters he had taken part in Friday's fighting. "I didn't feel good about it, but they are killing our people. What shall we do?" he asked.

"We had to push them (the Kikuyus) away to protect our land. The enemy comes, so you have to be strong. Today was serious."

The latest wave of violence followed the first meeting between Kibaki and Odinga since the troubles began.

Hundreds have died and 250,000 been made homeless in unrest that has shattered Kenya's stable image and badly damaged one of Africa's most promising economies.

The talks on Thursday, brokered by former U.N. boss Kofi Annan, had raised hopes of an end to the turmoil.

But those were soon dashed when Odinga's Orange Democratic Movement responded angrily to Kibaki's description of himself as the "duly elected" leader of Kenya.

On Friday, Odinga told Reuters he would not agree to serve as prime minister under Kibaki -- an idea floated by some diplomats and local media -- and he also called on the African Union not to recognise Kibaki at a planned summit in Ethiopia.

Odinga's party says the only acceptable options now would be Kibaki's resignation, a re-run of the ballot, or some other form of power-sharing followed by a new election.

Kibaki's Party of National Unity accuses Odinga's team of pre-planning violence against Kikuyus and says that it should respect the election board's verdict that their man won. (Additional reporting by Daniel Wallis in Nairobi; Writing by Daniel Wallis, editing by Tim Pearce)

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